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Honda and Henderson: School Accountability Needs to Be a Priority

The subprime mortgage disaster caused the greatest loss of wealth from communities of color in modern American history. When banks misled African-American, Asian-American and Latino borrowers into taking on crushing home mortgage debt they could never hope to pay back, we called it what it was: predatory lending.

Today, many for-profit colleges have picked up where the subprime lenders left off. They are using the same promise of the American dream as bait to trap vulnerable students — the vast majority of whom are women and minorities — into underperforming schools and saddling them with a lifetime of debt.

The costs to these students and taxpayers are tremendous. In the 2008-09 school year, the federal government invested more than $4 billion in grant aid to for-profit institutions, quadrupling its investment from just a decade earlier.

Despite this increased federal assistance, tuition at for-profit institutions continues to far outpace other schools, costing more than five times as much as community colleges. These for-profit schools are gaming the system — undermining the value of Pell Grants and forcing students to take out more loans.

As this industry’s profits have soared, so have student-loan default rates. Students enrolled in for-profit schools represent just 10 percent of all undergraduate students, but they account for 44 percent of all student-loan defaults.

The industry says these schools offer opportunities to low-income students that they couldn’t get elsewhere. But the debt being piled on students has devastating consequences, rendering them unable to receive credit to rent an apartment, buy a car or home, or receive future education loans. When these programs fail to deliver on their promises, students suffer for the rest of their adult lives and taxpayers are left on the hook.

The industry is targeting and taking advantage of women, minorities and low-income students. About one out of every four African-American, Asian-American, Latino and low-income students starts his or her postsecondary education at a for-profit institution. But these students’ graduation rates are far below the rates for such students at public and nonprofit colleges. Just like the subprime mortgage lenders, this industry is profiting off the misery of our country’s most vulnerable communities.

We believe the Department of Education took the right step in issuing a rule that holds these schools accountable for delivering on their education and career promises.

Under the rule, colleges that fail to demonstrate their programs are preparing students for “gainful employment” would risk losing their eligibility to participate in federal education grant and loan programs. This rule is not nearly as strong as it could be, but is a long-overdue and important step in protecting students and taxpayers from unscrupulous career-education programs. 

While the rule does not include many important protections urged by civil rights, student, women’s, labor and consumer organizations, it sends a strong message to many for-profit programs to start putting students first. Its focus has been narrowed to those programs that, after four years, still fall far short of delivering a quality education. Those programs that serve their students well, however, will easily pass muster under the rule.

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